Times have changed since a promise and handshake were all you needed to get a loan. Now credit scores speak to your character. Most credit unions primarily rely on credit scores to help make consumer lending decisions. Credit scoring models incorporate credit scores with other characteristics related to creditworthiness. In today’s market, there are dozens of different credit scoring models available, from generic models such as the VantageScore 3.0 model, to customized models that are generally expensive to build and maintain.

Even so, it’s a common misconception to think of credit scores as a commodity, or a “one-size-fits-all” risk management tool. A credit score is the numerical representation of the likelihood that a consumer within a specific population will become 90 days or more past due on a debt obligation in a two-year timeframe. It’s important to remember that this propensity to default is assessed within the context of the population being scored. The most effective credit scoring models incorporate other relevant information, such as current economic factors, over a greater population. Choosing the right model for your credit union can help you in ways you might not expect, from saving time and expense to improving accuracy and applicant pools.

Year-end 2012 credit union data was released in the last few weeks. That’s an awful lot like running up and down the streets yelling, “Hey, everyone, the new phone book is here.” But for data nerds generally and these mortgage data nerds specifically, it’s a highly anticipated event. Although trends are trackable intra-year and performance predictions are easy to make, this is when we find out what really happened.

2012 was an eventful mortgage lending year. Credit unions closed $124 billion in first mortgages, the highest amount recorded in the industry’s five-decade home finance history. While dollars lent are good, market share is better. It grew, too, to 7.09%, also the highest it has ever been. If you are keeping score like the two of us have for so many years, this is truly good news. Both dollars and share continue the upward trend that began in 2006.

There are many different ways to look at mortgage lending performance. Total dollars and share of the US market are two broad measures. They are simple to calculate and easy to obtain. The reality is, however, neither tell us much about individual credit union performance, and neither provide a means of judging lending achievement vis-a-vis other credit unions. We think there are four simple ways to do that, too.

I like to say that one of a visionary leader’s most important functions is seeing over the horizon and recognizing opportunities and threats before anyone else does, and then shaping the strategy and tactics of the organization accordingly.

So for our year-end blog post I asked our Preferred Partners to tell us what they see coming over the horizon, from their perspective, that credit union executives need to be focused on and/or prepared for as we head into 2013. Looking back a year, I see some common themes—revenue issues, economic uncertainty, regulatory uncertainty, and political uncertainty. From that perspective, not much has changed as we look forward to 2013. Here is what a few of them said:

With over 12 million Americans still out of work, it should come as no surprise that consumers are hanging on to their cars for three to four years longer than they did in pre-recessionary times. Yet America’s long-standing love affair with cars continues — and that
presents plenty of opportunities for credit unions.

Despite the fact that consumers spent an estimated $36 billion to keep their clunkers on the road in 2011, auto purchases are making a comeback. The National Auto Dealers Association forecasts that over 13 million new cars will be bought in 2012. As many Americans start thinking about their next car, observers note that it isn’t just new car purchases that are improving — used cars and auto leases are also seeing strong increases.

It’s nearly football season, which gives me license to use whatever football metaphor I choose – at this stage of the pre-season they aren’t stale yet!

A football metaphor is also appropriate because of what you are likely to see when you’re watching a game on TV – commercials, and lots of them. Among them you’ve probably noticed ads from State Farm – but how many of you noticed a very important change in their positioning, one that has tremendous implications for credit unions?

If you look closely, the ads stress three things – Insurance, Mutual Funds and ‘State Farm Bank.’ We certainly count on State Farm to be selling insurance. But full-fledged banking solutions (mortgages, car loans, home equity loans) are not something most consumers expect from an insurance provider.

Remember when H&R Block made a strategic move into banking a few years ago to capture a larger share of client refund dollars? Now they offer checking and savings accounts, IRAs, CDs, lines of credits, and even their own debit and credit cards.

Just as this move from H&R Block threatened credit unions by providing competition, so too does this change in positioning from State Farm. Just like paying taxes, buying insurance is another thing that your members do each year. In fact, you bring insurance agents in town direct business by making insurance a prerequisite for receiving a car or home loan (and they thank you for it, believe me!). The entry of a firm like State Farm into the business brings scale and national brand equity to the table, which means that you’re now facing a well-funded and formidable competitor in the banking landscape that wants a larger share of your member dollars.